B2Gold Corp. (TSX: BTO) is a Canada-based low-cost, senior gold mining company. It has three operating open-pit gold mines in Mali, Namibia, and the Philippines and numerous exploration projects across four continents.

Key highlights

• Record Gold production in FY21: On February 22, 2022, the company came up with its Q4FY21 and FY21 results, stating its annual gold production of 1,047,414 ounces, clocking the thirteen successive increases in its annual gold production. This record production fetched the staggering annual revenues from its gold sales of USD 1.76 billion on the total sales of 981,401 ounces of gold at an average realized gold price of USD 1,796 per ounce.

• AISC within the guidance:For FY21 the All-in sustaining cost was at USD 888 per ounce sold which is very much within the guidance of USD 870- 910 per ounce as stated by the company. Further, the AISC on the consolidated basis from its three major operating mines came at USD 874 per ounce sold, which is optimum as per the company guidance range of USD 860 – USD 900 per ounce. The cost within the budgeted range or lower, ensures the operational efficiency of the company impacting the bottom line positively in the results.  

• Industry beating margins: The company shined on the profitability metrics by stating an EBITDA margin of 64.9%% for Q4FY21 as compared to the industry median of 39.8%. Further, it optimized its operating costs which is unambiguously coming across its Operating margins of 45.1% for Q4FY21 vs the industry median of 26.7%.
  

Source: REFINITIV, Analysis by Kalkine Group 

Risks associated with investment

The company majorly deals in gold mining and its revenues are a proxy play of the gold prices to a great extent. The safe-haven metal is subject to volatility because of several reasons, which could be geopolitical tensions, rising inflation, measures to counter that, etc. Further, the mining sites are under the surveillance of the Environmental, Social, and Governance norms which involve the safety of workers, limited pollution, and prevention of certain chemicals usage and explosives, which raises the cost of operations from time to time.   

Financial overview of Q4FY 2021 (Expressed in thousands of USD)

Source: Company Filing 

• Increase in Revenues: The company posted a growth of 9.7% in the Q4FY21 revenues from Gold sales to USD 526.11 million as compared to USD 479.52 million in pcp. This increase was from the 14% rise in the quantity of gold sold which was slightly neutralized by a decrease of 4% in the average realized gold prices for the period reported.   

• Operating Costs: The consolidated operating costs for the Q4FY21 were higher than the budgeted amount, because of the rising costs of raw materials including fuel, reagent, and other consumable costs along with the appreciation in the local currency. This resulted in the All-in sustaining cost of USD 844 per gold ounce sold in Q4FY21, whereas the budgeted cost assigned at USD 763 per gold ounce sold. Further, depreciation and depletion expenses weighed the costs upwards by USD 123 million in Q4FY21.

• Net Income:  For Q4FY21 the company reported Net Income of USD 153.14 million vs the Net Income of USD 174.40 million in pcp. The net income attributable to the shareholders stood at USD 137 million for Q4FY21 as compared to the USD 168 million in pcp.

Valuation Methodology (Illustrative): Price to Earnings Based

Analysis by Kalkine Group 

Stock recommendation 

The company gave 21.31% positive returns in the last one month and 9.63% returns in the past six months. Further, the strong gold demand and rising prices acted as the tailwind to the company's annual performance. The record annual gold production, with the consecutive surge in the past thirteen years, along with the higher Average Realized prices of gold, boosted the annual results, and provided the shinier outlook ahead. The annual guidance of 2022 suggests the total production of gold in the range of 990,000 to 1,050,000 ounces keeping the consolidated cash operating costs in the range of USD 620 to USD 660. On the valuation front, the stock still shows the headroom left to catch with its peers, leaving the scope for the investors to match the industry valuations.

Therefore, based on the above rationale and valuation, we recommend a “Hold” rating at the closing market price of CAD 5.35 on March 1, 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. We have considered Kinross Gold Corp, SSR Mining Inc., Yamana Gold Inc., etc. as the peer group for the comparison.

One-Year Technical Price Chart (as on March 1, 2022). Source: REFINITIV, Analysis by Kalkine Group

Disclaimer

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